Personal Finance

The lifelong question "how do I split finances with my partner?" is answered by Suze Orman in these clear steps

Rich Duprey

Published: December 4, 2024 6:25 pm

It used to be when a couple married there was a single family checking account. Even when there were no longer just single-income families, both the husband and wife combined their incomes into one account to pay the bills.

Times change and even the typical makeup of what a married couple looks like is different today. Particularly with the high cost of living, almost every partner is required to work, but household finances have evolved.

More often than not, even before couples move in together, each has developed a career and brings their respective incomes into the relationship. Sometimes they are on equal footing, other times, there is a great disparity between them.

That raises questions about how to handle the finances. Do you still combine all the money, have separate accounts for your own bills, or do you have three different pots: yours, mine, and ours? It can be a major source of conflict in a relationship, especially when one person makes significantly more than the other.

Having a single household account can mean one person is spending more on personal wants than they put into the pot or they are contributing less to joint expenses based on their income.

Personal finance guru Suze Orman has a simple solution that dissolves whatever power dynamics and potential rancor that income disparity between partners creates.

24/7 Wall St. Insights:

• Money problems are one of the leading causes of relationship problems leading to an increased incidence of divorce.
• Resolving the power dynamic between a couple with unequal incomes can go a long way toward creating a more harmonious relationship.
• How you divide up the responsibility could be a relatively simple solution.

Money remains the root of all problems

One of the largest reasons couples divorce is because of money. Forbes found that the chance of a divorce increases by 45% when partners have different values about money. For example, one person might be a spendthrift and the other a saver, possibly even miserly. Even if one or the other is not to the extreme, but their partner has opposing views on money, it will create marital strife.

That’s why it is important for couples to have frank discussions before they come together in a household about how they will handle finances in the family. If two people are so diametrically opposed in their outlook, it doesn’t bode well for the long-term sustainability of the relationship.

Yet that can be readily avoided by following Orman’s suggestion.

Yours, mine, and ours

In a segment for CNBC Television, the personal financial planner laid out a scenario where one person makes $3,000 a month in income and the other $7,000, giving them a total of $10,000 in household income. If common bills equal $3,000 a month and are paid on a 50-50 basis, the person making less each month is contributing 50% of their income to the bills while their partner is only giving 21%.

That inequality can lead to resentment and arguments. Rather, a more equitable solution would be for each person to contribute an equal percentage to the bills. Since household income is $10,000 and the bills are $3,000, that is 30% of the total. That means the person earning $3,000 would pay $900 towards the bills and the higher wage earner would pay $2,100. That is 30% for both.

There is no power dynamic at play then because they are sharing a proportionate amount based on their ability to pay.

Key takeaways

It’s clear Orman believes in the three jars solution, though there are many couples today who each pay their own way. For example, where one person owned a home before moving in together, the other would pay “rent” for living there. Each is then responsible for whatever bills they incur on their own.

Although that may seem too transactional to many, a sort of business-like relationship not based on emotions like “love,” it does give each the freedom to pursue their own lifestyle. That way the saver can be frugal and the spendthrift can purchase what they want.

Of course, there is no perfect solution. The frivolous spender, for example, might inherit a windfall when the saver dies if he scrupulously put money aside for retirement. It would not work in reverse, though, if no care was given by his partner for savings. 

The key to success may be to find someone who has the same values about money and spending as you do, preferably someone who believes in living below their means, saving and investing for the future, and looking forward to living a lifetime together in relative harmony.